The EIFD Manual:How to Form Enhanced Infrastructure

Financing Districts

1601 N. Sepulveda Blvd., #382, Manhattan Beach, CA 90266TEL: (424) 456-3088 | www.kosmont.comDISCLAIMER: The information presented herein is not an opinion of viability or applicability. The reader is urged to review the EIFD statutes and related law, and should not rely on the statements included herein for any determination. Application of EIFDs can vary substantially based on specific circumstances. Advice of legal counsel and experienced real estate and finance specialists is recommended.

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How is an EIFD Established?

1601 N. Sepulveda Blvd., #382, Manhattan Beach, CA 90266TEL: (424) 456-3088 ◊ www.kosmont.com

• Successor Agency Prerequisite » Legislative body must obtain a “Finding of Completion” from the Department of Finance (DOF)

» Completion of State Controller review of agency asset transfers after 1/1/2011

♦ Determine if the RDA Successor Agency complied with Controller’s findings and orders

• Defineaprojectarea » District boundaries need not be contiguous

» District shall only finance public capital facilities or other specified projects of communitywide significance

» No blight test needed

• Reach out to parties interested in forming the District

» Multiple parties can govern a District with each entity allocating a portion of its property tax increment to the District

• Initiating Public Agency (City or County) adopts a resolution to establish the District and appoints the Public Financing Authority (PFA)

• The PFA, the Governing Board of the EIFD, is a separate governmental entity with extensive powers:

» Prepare the Infrastructure Financing Plan (IFP) that details the investment program and funding streams for projects

» Schedule a public hearing to review the IFP

» Propose a resolution to adopt the IFP and form the EIFD

» Approve the IFP and officially establish the EIFD

Receive Finding of

Completion

Certify that no assets under

litigation benefit

Comply with State

Controller’s Asset Transfer

Review

City/County identifiesDistrict

members

Defineprojects/

projectarea

City/County adopts

Resolution of Intention to establish

EIFD and creates Public

Financing Authority

(PFA)

PFA creates Infrastructure

Financing Plan (IFP)

Distribute to property owners and affected tax

entities

Conduct environmental review process

(CEQA)

PFA conducts a public

hearing to review the

IFP

Approve the IFP

PFAratifiesresolution

“proposing” adoption

of IFP and formation of

EIFD

PFA adopts IFP and

Resolution of Formation creating the

EIFD

Step 1 Step 2 Step 3 Step 4 Step 5 Step 6 Step 7 Step 8

EIFD FORMATION PROCESS

What is an EIFD?• EIFDs are independent government

entities that may be governed by cities, counties, or special districts

• Special districts cannot be founding members, but are affected taxing entities; can contribute tax increment or fees

• EIFDsofferanewplatformtofinanceanarrayofeconomicdevelopmentprojects,including infrastructure

• EIFDs are authorized to use property-based Tax Increment Financing (TIF)

• TwomajorcomponentsofEIFDsare: » Public Financing Authority (PFA) » Infrastructure Financing Plan (IFP)

• EIFDshaveflexibilitytouseanexpansivefinancingtoolkit:

» Property tax increment - except for schools » User fees / Development fees » Loans » Federal and state grants » Private investment » Bond Issuance - 55% voter approval (for a tax increment bond)

Introduction to EIFDs & Formation Process

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AB 313 (Atkins)State legislature unanimously approved AB 313, and Governor signed. Effective date is 1/1/2016. AB 313 includes the following primary changes to the EIFD statute:

• Once the District is formed by City or County, PFA will prepare, propose, and adopt the IFP

• Special district fee revenue eligible for contribution to EIFD

• Adds “very low income” category in affordable housing requirements

• Authorizes EIFDs to utilize powers under Polanco RDA Act (remediation) or Division 20, Chapter 6.10 of the Health & Safety Code (environmental cleanup)

Frequently Asked Questions1. Who is Interested in Forming/

Participating in the EIFD?• Which counties/cities/special districts would

measurably benefit from the EIFD and what is their share of property tax increment?

• What is the economic impact of the investment in the local economy?

2. What Needs to Get Done?• What are the infrastructure improvements and

development projects that can be addressed?

3. Who is Located in the EIFD?• Do the identified project(s) serve multiple jurisdictions?• How many registered voters are located in this EIFD?

(for bond issuance vote) » If less than 12, voting is by landowners. If 12 or greater, vote is by registered voters in the District

4. WhereistheEIFDProjectArea?• What are the boundaries/scale of this District?• District does not need to be contiguous

5. What are Funding Sources?• An agreed upon portion of the growth in property tax

from the participating agencies• Are there private sector partners/funding sources?

(development impact fees, start-up capital)• VLF increment available upon formation• Special taxes (e.g. Mello-Roos, utility user fees, other)

6. WhatValueistheProjectOverTime&What is the Cash Flow in Early Years?• Run initial cash flow and conduct resiliency analysis• Source early (start-up) contributions of funds

31601 N. Sepulveda Blvd., #382, Manhattan Beach, CA 90266TEL: (424) 456-3088 ◊ www.kosmont.com

Did You Know?EIFD property tax increment

comes from two sources:• Amount of growth in property tax within

boundaries of EIFD• Growth of agency-wide property

tax in lieu of VLF

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• Identifyprojectarea&landuses

» Develop assumptions for absorption of land uses and for per unit values by land use type

» Consider Specific Plan (approval/update)

• Determine type and cost of infrastructure the City/County and developer(s) want/need to build

• What costs will the City/County and developer(s) bear?

» Administrative and/or project management costs

» VLF increment available upon formation

• Determine the taxing entities that arethebestfitforPFABoard

» Connect landowners with potential PFA members to discuss economic benefit of EIFD

» Identify potential tax increment pledges by key agencies in the District

Stage 2: Identify Funding Sources• Can use multiple funding sources

along with tax increment

» If EIFD issues bonds, then 55% voter approval needed

• Other funding sources

» Private investment » Property tax revenue including Redevelopment Property Tax Trust Fund (RPTTF)

» Vehicle License Fee (VLF) property tax backfill increment

» Development Agreement / Impact Fees

» User fees » City/County/Special District loans » Hotel TOT » Benefit assessments

♦ Contribution from Special Districts ♦ Levied by EIFD

» PACE commercial energy loans for private industry

• Potential to apply State funding sources

» Proposition 1 bond funds » Cap-and-trade proceeds

• Federal and State Grants

» Greenhouse Gas Reduction Funds (State)

» DOT/EPA/DOE funds (Fed.)• Amount from tax increment

during initial years may be small; early funding sources should be explored:

» Money from RPTTF (excluding school districts)

» Bond Anticipation Notes » Community Facilities District + EIFD Pledge: Money from CFD could support bond issuance

» Seed loan/note from a City/County or other public agencies/institutions

Stage 1: Preliminary Analysis

Stage 3: Financial Assessments• Determine current assessed propertyvalueinprojectarea

• Estimate potential property tax revenuefromprojectarea

• Determine revenues from other taxing agencies; sources and impact fees

• Evaluate bonding capacity of projectarea(applyunderwritingassumptions)

• Estimate potential State and Federal funding sources

• Cash Flow Analysis to solve for viabilityoftheEIFDproject

• Fiscal Impact Report to identify tax/jobbenefitsfromtaxincrementandvariousprojects

EIFD Fund

EIFD Work Plan: How to Get Started

Did You Know?•Private sector can serve as a

start-up funding source for EIFDs

• Tax increment available for 45 years from issuance

of bonds

4 1601 N. Sepulveda Blvd., #382, Manhattan Beach, CA 90266TEL: (424) 456-3088 ◊ www.kosmont.com

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WhatProjectsCanBeFundedbyanEIFD?

Industrial Structures Affordable Housing / Mixed Use TODProjects

Wastewater / Groundwater Light / High Speed Rail Civic Infrastructure

Parks & Open Space Childcare Facilities BrownfieldRemediation

Libraries MilitaryBaseReuseProjects Roads and BridgesSB 628, Section 53398.52 (b), effective Jan 1, 2015

51601 N. Sepulveda Blvd., #382, Manhattan Beach, CA 90266TEL: (424) 456-3088 ◊ www.kosmont.com

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6 1601 N. Sepulveda Blvd., #382, Manhattan Beach, CA 90266TEL: (424) 456-3088 ◊ www.kosmont.com

EIFDs Can Capture Tax & Job Growth

EIFDs Bring Communities

and Investors Together

District established; Tax increment captured over a

period of 45 years (Bonds can be issued to

fundprojects;paidforbytaxincrement)Use approved IFP to promote

District with investors to initiate keyprivatesectorprojectsinconjunctionwithplannedinfrastructure improvements

Once infrastructure and economicdevelopmentprojectsare approved and funded, they

will start to generate newtaxesandjobs Improvements to existing

properties can also induce growth (e.g. public assisted

commercial energy loans, such as PACE, can be used by owners in District to improve property)

New infrastructure and initial privatesectorprojectscan lead to additional development activity

New infrastructure, economic developmentprojects,plusPACEimprovements,createjobsandnew property tax increment for reinvestment or public services

Without an EIFD, a City/County will miss out on tax increment funds and have less resources to build infrastructure and induce economic

developmentprojects

With EIFDs, non-school property tax increment is captured, leading the way to

further economic investment and jobandrevenuegrowthProp

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71601 N. Sepulveda Blvd., #382, Manhattan Beach, CA 90266TEL: (424) 456-3088 ◊ www.kosmont.com

PotentialEIFDProjectApplications

Issue: Aging water and sewer systems pose significant fiscal and public health concerns. Recent water main breaks have caused significant physical damage and financial stress for public agencies. Despite approval of Prop 1, there remains a shortage of funding for water projects. Local governments cannot fund these projects solely with county and/or city funds.

Opportunity: Cities and Counties need to improve and modernize their water and sewer infrastructure. Local governments need the flexibility to be able to finance these projects through a diverse funding stream. Investments in water infrastructure can create a more efficient system of water management and minimize the extensive costs attendant to remediation of water main breakages.

Role of the EIFD: A City or County may form an EIFD to fund water infrastructure and wastewater management projects. Financing for projects may come from benefit assessments placed on property owners and fees for water usage. These additional financing sources may ease the financial burden on local governments while increasing the number of local and regional infrastructure projects. EIFD funding, along with cap-and-trade proceeds and water treatment grants, may attract further private investment.

ProjectExample2:WaterProjects

ProjectExample1:Transit-Oriented Development

Issue: Sprawl and lack of transportation options lead to automobile dependency. Heavy reliance on automobiles, coupled with pollution from other sources, lead to excessive greenhouse gas (GHG) emissions. After Texas, California is the second highest emitter of GHG producing 350 million tons of GHG emissions annually.

Opportunity: Regions will look to reduce sprawl and improve air quality. Transit-oriented and infill development (TOD) is one way to not only reduce sprawl and car dependency, but to also invest in the neighborhoods that surround transportation options. The result is the creation of economically revitalized communities.

Role of the EIFD: A cohort of cities and special districts may participate in an EIFD to build a transit line/system, construct stations, and develop the neighborhoods around the stations. In addition to transit projects, the District can fund physical improvements such as sidewalks, streets, bicycle lanes, and new parking structures. User fees from parking, cap-and-trade funds, and revenue growth from rising property values, can be used to catalyze private investment. Prop

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Contact Us

*CertifiedMBEandSBE

Kosmont Companies is the proud recipient of: ♦ “Small Private Latino Business of the Year” (2015, L. A. Business Journal) ♦ “Award of Excellence in Economic Development Partnerships” (2015, CALED)

Larry J. Kosmont, CRE®

(213) 507-9000lkosmont@kosmont.com

Brian Moncrief(805) 469-7364

bmoncrief@kosmont.com

Jeff Simonetti(909) 568-5645

jsimonetti@kosmont.com

Brandon Phipps(510) 439-6622

bphipps@kosmont.com

Archie Davenport(323) 715-1579

adavenport@kosmont.com

Fernando Sanchez(917) 992-2438

fsanchez@kosmont.com

Did You Know?• EIFDsareanewwaytofinanceeconomic

developmentprojectsandinfrastructure

• EIFDs are authorized to use property-based Tax Increment Financing (TIF)

EIFD 122015.2

1601 N. Sepulveda Blvd., #382, Manhattan Beach, CA 90266TEL: (424) 456-3088 | www.kosmont.comDISCLAIMER: The information presented herein is not an opinion of viability or applicability. The reader is urged to review the EIFD statutes and related law, and should not rely on the statements included herein for any determination. Application of EIFDs can vary substantially based on specific circumstances. Advice of legal counsel and experienced real estate and finance specialists is recommended.

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